| When starting the process of buying a foreclosure | | | | the buyer is in a financial position to purchase the |
| home, there are obstacles you must know about in | | | | property, and is in the strongest possible position to |
| order to make your purchase and how to measure | | | | negotiate. It s best to work with a lender who |
| the "risks" of buying real estate foreclosures. | | | | understands the foreclosure process, and can guide |
| Anytime you purchase a foreclosure home without | | | | the buyer through certain steps, such as ensuring that |
| even a financing contingency, you had better know | | | | a property is FHA-compliant. Another reason to |
| what you are doing. There are clear steps you can | | | | consider pre-qualification is that not all lenders finance |
| take that will help make buying a foreclosure home a | | | | foreclosure properties. |
| better experience for you and make it the best single | | | | Having approved financing in-hand makes negotiations |
| real estate investing opportunity of your life! | | | | with both the seller and the lender easier, and may |
| 1. Educate yourself on the different types of | | | | even make it possible for the buyer to simply cure the |
| foreclosure properties, and the foreclosure process. | | | | default and take over the existing loan to reduce loan |
| There are three basic types of foreclosure properties, | | | | processing fees. |
| representing different stages in the foreclosure | | | | 3. Engage a real estate agent as a buyers |
| process: notice-of-default (NOD) and notice of trustee | | | | representative |
| sale (NTS), which are both pre-foreclosure properties; | | | | Most people hire a real estate agent to sell their home. |
| and real-estate-owned (REO), a foreclosure property | | | | These seller s representatives are charged with |
| which has been re-purchased by the bank. | | | | making the sale and negotiating the best deal for their |
| For most consumers, buying a pre-foreclosure | | | | clients. Buyer s representatives have the home buyer |
| property from a private homeowner is the best option. | | | | s interests at heart, and are charged with finding the |
| It s important that both the buyer and the seller see the | | | | right property and negotiating the best price for their |
| situation as a win-win situation, in order to ensure a | | | | clients. Picking the right real estate agent will make a |
| smooth process. In this case, the seller is able to get | | | | buyer s life much easier. There are agents who |
| out from under a mortgage without destroying their | | | | specialize in the foreclosure market, with specific |
| credit rating, the lender is saved the time and expense | | | | experience in REO properties. Look for an agent with |
| of foreclosing on the property, and the buyer gets a | | | | foreclosure transaction experience, as well as |
| below-market price on a home. | | | | knowledge of local, regional and state laws. But it s |
| Foreclosure auction sales are typically for the | | | | also important to consider the agent s knowledge of |
| professional investor. These properties are formally in | | | | the area; their ability to close a deal; and their access |
| default, and sold to the highest bidder at an auction. | | | | to other professionals (attorneys, lenders, mortgage |
| Buyers are required to be physically present at the | | | | and title professionals) to ensure that the buyer is in |
| auction, and must pay 100% of the sale price in cash, | | | | good hands. I found such help from the consultants at |
| on the spot, or with a letter of credit. Though | | | | 4. Shop for Equity First Then Marketability. |
| foreclosure auctions can offer significant savings, they | | | | Many would-be investors make the simple mistake of |
| are not for the feint of heart or the uninformed. Unless | | | | repeating what they have heard regarding what |
| the buyer is already familiar with a particular property, | | | | makes a good real estate investment. They believe |
| there is usually little time to examine it. And the buyer | | | | that a 3-bedroom/2-bath free standing home is the |
| will be competing against professional investors and | | | | only investment worth making. This is absolutely not |
| sometimes even the lender at the auction. | | | | true. What you want is equity. You do not want to end |
| Once the lender officially reclaims a home, it becomes | | | | up with an oddball property. If one-bedroom |
| a real-estate-owned property (REO). While REO | | | | condominiums are commonplace in your real estate |
| properties typically offer more time for evaluation and | | | | market then they are every bit as valuable as a single |
| a more standard bank-managed transaction, their | | | | family/free standing home. Shop for equity first and |
| prices are usually very close to full retail market value. | | | | then for marketability. Leave all the foolish notions for |
| 2. Secure financing early | | | | those who know less than you. Your potential market |
| It's important for a buyer to be pre-qualified before | | | | has just increased because your knowledge with |
| engaging in discussions with a seller. This ensures that | | | | regard to buying a foreclosure home has increased. |